Integrating ESG Into CRE Business Goals with Kelsey Duffey of Walker & Dunlop

Thank you for having me. I'm excited to be here.

Yes, thank you. I'm originally from New Orleans, Louisiana, but I have not lived there for many years. I went to boarding school for high school kind of in the Northeast, and I went to Philly for college, so further Northeast. I got my first job out of college as a marketing job in Washington, DC, and I quickly realized marketing wasn't for me. I landed, I will say landed because it was through a friend, which is how many jobs come about, at a commercial real estate firm, Walker & Dunlop, in 2012. So I kind of fell into the industry, which is something I hope to touch on a little bit today, how it's a little bit of an unknown industry for many, especially women and minorities today. I locked into this role, I would say, and I joined the investor relations team in 2015 and have been in that role for eight years now or so. The ESG or sustainability portion of my role came about somewhat organically, I would say, over the past five years. What about Walker & Dunlop struck me and why I've stayed there for 12 years is just the commitment to the people that we have. The company as a whole is definitely fully invested in making meaningful impact in the industry. But I will say, when I first joined for several years, we weren't really doing a great job communicating that. As ESG in general just became a more important topic and a lot of our shareholders were asking about it, we didn't have the right disclosures and communications in place, but we were doing everything right. So that's kind of how my role started getting shaped on the ESG side of investor relations. We're a publicly traded company, but we're a little bit unique in today's world because we're kind of a family-owned public company, if that makes sense. Our CEO is Willie Walker. Walker & Dunlop, his grandfather started the company in 1937. It really shapes our culture that we're a family-owned but public company. That speaks to how family-owned companies just tend to feel like a family, and that's how Walker is. That's what has struck me is just the investment in our people, and that has been at the core of our ESG program. Hopefully we'll get to talk more about it, but that's kind of how our ESG program started, was really with our people and better communicating that. I've really enjoyed building out the formality of our ESG program over the past five years from what we were already doing for decades.

No, and to be honest, I don't love ESG. A lot of companies are moving away from it, as you all know, not just because it's becoming politicized, but because employees don't connect with it as easily as they do if you say impact or sustainability or corporate responsibility. So I find even internally in presentations, I'm writing ESG, parentheses, environmental, social, governance. I want everyone to understand what it is. So no, it's taken a while. From an employee perspective, the governance part always is a little less important to our employees, but it is important to our shareholders as a public company. ESG in 2015 was a new concept, but what has been interesting to me is that it's ever-changing. Every year, while I feel like I know more, I feel like I'm still drinking out of a fire hose because there's just so much that goes into that simple acronym. It's so big, and it's also ever-changing.

Yes, exactly. It's a full-time job just keeping up with that. Then we have the various stakeholders as a public company with our shareholders, which is a large part of my job obviously, but then your employees, your vendors, your partners, and everything else.

Sure, yes, that's a great question because it's not a household name. We are a commercial real estate finance company. We are one of the largest providers of capital to the commercial real estate industry, meaning we finance apartment buildings, office buildings, retail centers, anything like that, though primarily our focus is on multifamily. We like to say that we are building community, so our capital is going towards financing where people live, where they work, where they shop. That puts our business in every aspect of the community across the United States. We have about 1,500 employees, 50 or so offices throughout the country. We're headquartered in DC, though I'm in Dallas as we discussed. It's grown. When I joined in 2012, we probably had 250 employees, so we've had pretty dramatic growth and done very well from a stock price appreciation perspective and all those things. We're a growth-driven company but also a people-driven company, so I think that combination has worked well for us historically.

Yes, definitely. Like I said, we're one of the largest multifamily and commercial real estate lenders in the country, and we are using that leadership position. We're not a household name, but if you're in the industry, you know who we are, and that speaks a lot because it's a huge industry. We have been very focused on certain internal efforts but also efforts throughout the industry. Internally, we have set goals on increasing diversity among our leadership, among our entry level, throughout the organization. Across the industry, we have established a partnership called CRE United, Commercial Real Estate United, with various stakeholders in the industry, some household names for sure like Fannie Mae, Freddie Mac, KKR, Kane Anderson, big names. The goal is to open channels for minorities and women in the industry. Our company has done a great job diversifying. I think we're at 35% women, 65% men, and that's probably in line with the industry. But when you look at the ownership level of commercial real estate, where the real wealth is, if you want to own commercial real estate property and run a business, it's only 4% or 5% women and minorities. The goal is to really open doors and build. It's hard to break in. I don't want to say it's an old boys' club, but it's an industry that has been around for a long time, and breaking in can be tough. The goal of CRE United is to break down those barriers and build networking opportunities, connections, but also access to capital. There's real capital coming to these minority-owned and women-owned businesses through the partnership. It's been super successful so far, but more exciting to see what's to come because it's still relatively new.

Correct, yes, that's the goal.

Yeah, that's a great question because I agree it can be different for every company. For us, like I said, we are focused on our people. They're at the core of everything we do. They're how we are successful. We also look at our operations as part of our ESG because we're financing communities, and I think that gives our employees a purpose, so that is important to us as well. Then, like I said, we're also using our leadership position to create change in the industry. I think those three pillars are very important to us, but it all goes back to the people. What I've noticed about companies and looking at so many companies' ESG programs is that ESG programs and what companies stand for happen very organically. For us, when I started looking at what Walker & Dunlop was doing back in 2012 that could be classified as ESG, it was centered around our people and retention, training, leadership opportunities, wellness benefits, and everything that went into creating a happy, healthy, productive employee. So that's been our focus. For the financial services industry, human capital is a big, important pillar of your ESG program. But it's true for many companies. When you start to look at what they stand for, you think, 'Oh, that makes sense, it's not a reach.' While we do have a very robust and impressive environmental program for a company of our size in our industry, that was almost a secondary part. It came after the people. We've been working hard on that, but that's something we've invested more time and resources in, and it didn't happen as naturally for us.

Exactly, no, that's right. Every company finds their niche and does the best they can in that space.

Yeah, we've invested a lot of resources in that. I think employee engagement is super important to us. Our HR team has done a lot of work, especially in the post-COVID era. We have 50 offices, and with remote work, it's how do you keep everyone connected and feel like they're part of this? As we've grown, we still wanted to feel like that family company that I joined when there were 200 employees. We have listening sessions, we have amazing ERGs. I think we have 11 at this point, and participation in them for a 1,500-person company is pretty great. A lot of engagement, and that gives people space at Walker & Dunlop to connect with people and a safe space to connect with others outside of your normal work day. From the DEI perspective, I think we've really been a leader there. We have a full DEI team, and we're focused primarily on quantitative goals around bringing up women and minorities in management positions and among the top earners at the company. Our CEO thought that was important. We want to get women and minorities at those levels making the most money, not just evening out the workforce. It takes a while to have that movement through your workforce, so we're focused on entry level. We have a lot of partnerships with historically Black colleges and universities. We have intern programs that start as young as high school. I've had several interns come through my department. The hope is that we hire them and they move up from analysts, just like I did. I started as an assistant and here I am today. The company is great for that. We're working at the bottom levels and up, but we have goals across the space. Engagement since 2020 has been a huge focus for us. It takes a lot of resources and effort in a dispersed environment like we have, but it pays off because you want people to feel connected, or else they're not going to feel like they want to stay. I think that's what we've done a great job with here at Walker & Dunlop.

Yeah, that is a great question. That's with our recruiting efforts. We're always looking for top talent that are women, but like you said, there are a few. You can hire the best female teams that are established, but it's really about creating that lower level of entry level. They start in our underwriting analyst program and move up. I have several friends who are now the broker themselves, women friends at Walker & Dunlop who had that exact path. They are taking it upon themselves to mentor and sponsor other women because it's important to women in the industry to bring more women in. One thing that's interesting is that very few colleges have a major of commercial real estate, unless you're in business school. So it's a lot of educating people about the profession and what the opportunities are in the industry, of which there are so many. Sponsorship and mentorship among women, we at Walker & Dunlop have a great women's group, and within that we have sponsorship and mentorship programs that have been great. I've participated in them. Building those connections is helpful. Also, building an environment where women want to stay. I have two kids, and I'm not a broker myself, but I'm still in a male-dominated finance area of the industry. I feel like Halloween was yesterday. I wasn't at work the whole day yesterday because it was. Just creating that space where not just women but all parents and those in a caregiver role can feel like they have that flexibility makes women want to stay. If it's cutthroat, your wife doing it 30 years ago was a completely different environment. I think most companies have adapted, but it's still a tough industry. We're getting there, but we have work to do.

We do, yes. We have a very robust one. We also have a task force for climate-related financial disclosures, TCFD, it's more of an environmental-focused report. We're proud of that as well. We work very hard on our ESG report.

We just released it, not just, we release it pretty much every summer. For 2022, we released it in the summer. We'll do the same in summer 2023. It's a great document.

Got it.

That is a good question because we are actually meeting with our board of directors next week about our strategy for all things, including ESG. ESG has a place in that discussion. I would say, and this is a struggle for many companies, or not a struggle, just part of the ESG journey, is getting ESG to be completely integrated into our business operations. Our business itself is very ESG-oriented. We have an incredible affordable housing platform. In fact, we have equity ownership in affordable housing properties and an entire arm of our business dedicated to preserving and developing affordable housing, so that's amazing. We're the top green Fannie Mae lender, so we help finance properties that are making green upgrades and becoming more sustainable. We're proud of that. But integrating ESG into every area of our business has taken time. That's for the next two to three years, I would say, to ensure that ESG is part of our business decision-making process across the board. Always thinking back to our people and our mission of financing communities, but also creating change in the industry. If we keep going back to that as we integrate it into our business development processes and even some of our business travel processes, we haven't quite gone there yet, but things like that, that's the longer-term goal. I would say the key word is integration, getting more fully integrated. As we know, ESG and sustainability, there's no finish line. It's a journey.

Yes, agreed. I think we're getting there. While I do believe our company is a leader, we have great partners, and a lot of other larger peers like ourselves are equally focused on everything we've discussed. I think we're getting there, and that's very exciting. I want to see it through to the end, but there is no end. It's just always going to be getting better and better, and that's exciting in itself.

Oh my God, I love to do that. I love listening to some of the speakers you've had on your podcast. I look at a lot of our bigger competitors. JLL, for example, that's more of a household name, I would say. They're doing a great job on the environmental piece of their business. As an example of full integration, they offer advisory services on environmental issues for property owners. That's something we aspire to as a company. They have 50,000 employees compared to our 1,500, but I look at them. I recently listened to the head of sustainability at Clorox speak, and that was incredibly inspiring. They have complete integration, from all the development of their packaging all the way down to how a consumer views and handles the product and what they do with it. The complete integration in their business was incredible. It's a completely different industry, but it's great to look at companies like that and just see what they're doing. It's inspiring to see the focus on ESG across every industry in different facets. For Clorox, it's largely environmental, and I'm sure they have a great human capital management program as well. Just seeing every company make a difference in its own unique way is very inspiring. I take little tidbits back and try to incorporate them where I can at Walker & Dunlop.

Thank you for having me. This has been great.